INGENESIS v. USA
Filing
42
PUBLISHED OPINION. Signed by Senior Judge Eric G. Bruggink. (tt1) Copy to parties.
In the United States Court of Federal Claims
No. 11-754C
(Originally Filed: March 12, 2012)
(Reissued: March 23, 2012)1
**********************
INGENESIS, INC.,
Plaintiff,
v.
THE UNITED STATES,
Bid protest; NAICS code
selection; Small Business
concerns; Small Business
Administration Office of Hearings
and Appeals
Defendant.
**********************
Michael H. Payne, Philadelphia, PA, for plaintiff.
Elizabeth Marie Durfee Pullin, United States Department of Justice,
with whom were Kirk T. Manhardt, Assistant Director, Jeanne E. Davidson,
Director, and Tony West, Assistant Attorney General.
_______________
OPINION
_______________
BRUGGINK, Judge.
This is a pre-award protest of a solicitation for physician services by the
United States Army.2 Because of the small business size limitations placed on
1
In accordance with the protective order in this case, publication was
deferred pending the parties’ review for redaction of controlled materials.
Those redactions are indicated by brackets.
2
Contemporaneously herewith, we address plaintiff’s related bid protest
continue...
this contract, plaintiff, InGenesis, Inc., is precluded from qualifying for the
award. Currently before the court are the parties’ cross-motions for judgment
on the administrative record and plaintiff’s motion for leave to file the
declaration of its corporate president. The motions are fully briefed, and we
heard oral argument on March 7, 2012. As we announced at the conclusion of
oral argument, and for the reasons explained below, we deny plaintiff’s motion
to file the declaration and its motion for judgment on the administrative record,
and we grant defendant’s cross-motion for judgment on the administrative
record.
BACKGROUND 3
I.
The solicitation
On September 15, 2011, the U.S. Army Medical Command, Center for
Health Contracting, issued solicitation W81K04-11-R-0018, seeking offers for
multiple indefinite delivery/indefinite quantity (“IDIQ”) contracts for
physician services. The solicitation anticipated a maximum of five contracts
being awarded and contemplated a five-year performance period. The
minimum guaranteed contract amount for each contract was $1,000 with an
estimated maximum for all the contracts of nearly $400 million over five years.
The solicitation indicated that the procurement had been set aside for small
businesses.4
The performance work statement noted that the contract was to support
military treatment facilities (e.g., military hospitals) within the U.S. Army
Medical Command as well as other Department of Defense agencies. The
contractor was to provide “personal and or non-personal Physician Services,
which will contribute to a stable workforce tasked with providing quality
health care services to a diverse beneficiary population.” AR 208. The
2
...continue
challenging a solicitation for nursing services. InGenesis, Inc. v. United
States, No. 11-753 (Fed. Cl. Mar. 12, 2012).
3
The facts are drawn from the Administrative Record (“AR”).
4
Under Federal Acquisition Regulation 6.203, contracts may be set
aside for small businesses to fulfill statutory policies relating to small business
concerns. 48 C.F.R. § 6.203 (2011).
2
solicitation indicated that the contractor would provide medical doctors or
doctors of osteopathy from a wide-range of specialties, including specialties
from a non-exhaustive list provided in the solicitation.5 It is plain from the
performance work statement that the successful bidder would be furnishing
physicians who would use existing Army medical facilities.
Because of the small business set aside, the Small Business
Administration regulations contained in 13 C.F.R. part 121, subpart A apply.
Under these regulations, the contracting officer is to choose the North
American Industry Classification System (“NAICS”) code that best describes
the principal purpose of the product or services being acquired. 13 C.F.R. §
121.402 (2011). NAICS codes are promulgated by the Office of Management
and Budget and are used to classify an economic activity or industry for many
purposes. Using the already-established NAICS codes, the Small Business
Administration then imposes its own limitations on size and revenue. 13
C.F.R. § 121.201. Thus, when the contracting officer designates a NAICS
code for a small business set aside solicitation, the effect is both to target the
type of institutions solicited and simultaneously to impose size and revenue
limitations on those bidders.
The contracting officer selected NAICS code 621111 for the
solicitation. The revenue limit associated with that code caps awards to firms
with no more than $10 million in annual receipts. NAICS code 621111
provides that:
This U.S. industry comprises establishments of health
practitioners having the degree of M.D. (Doctor of Medicine) or
D.O. (Doctor of Osteopathy) primarily engaged in the
independent practice of general or specialized medicine (except
psychiatry or psychoanalysis) or surgery. These practitioners
operate private or group practices in their own offices (e.g.,
5
The twenty-five specialties listed in the non-exhaustive list include:
general and family medicine, neurosurgery, emergency medicine, allergy and
immunology, endocrinology, gastroenterology, ophthalmology, orthopedics,
otolaryngology, hematology and oncology, radiology, general surgery, internal
medicine, neurology, pulmonary diseases, pediatrics, anesthesiology, obstetrics
and gynecology, physiatry, plastic surgery, urology, psychiatry, dermatology,
preventative medicine, and occupational medicine.
3
centers, clinics) or in the facilities of others, such as hospitals or
HMO medical centers.
NAICS 621111, 2007 WL 6902774 (NAICS).
Prior to issuing the solicitation, the contracting officer completed a
“Findings” report to explain his NAICS code selection. The contracting
officer used this report to analyze applicable NAICS codes for three sets of
IDIQs, including nursing, physicians, and ancillary services. In that report, he
considered four NAICS codes: (1) 561320, Temporary Help Services; (2)
621399, Office of All Other Miscellaneous Health Practitioners; (3) 621111,
Offices of Physicians (except mental health specialists); and (4) 622110,
General Medical and Surgical Hospitals. After noting that code 621111
contemplates practitioners who practice in general or specialized medicine and
operate in either their own offices or facilities, such as hospitals, the
contracting officer noted, “This NAICS code is considered appropriate for the
Physician crafts contemplated here.” AR 548.
The contracting officer also considered code 622110, the code which
plaintiff asserts should have been used. NAICS code 622110 provides:
This industry comprises establishments known and licensed as
general medical and surgical hospitals primarily engaged in
providing diagnostic and medical treatment (both surgical and
nonsurgical) to inpatients with any of a wide variety of medical
conditions. These establishments maintain inpatient beds and
provide patients with food services that meet their nutritional
requirements. These hospitals have an organized staff of
physicians and other medical staff to provide patient care
services. These establishments usually provide other services,
such as outpatient services, anatomical pathology services,
diagnostic X-ray services, clinical laboratory services, operating
room services for a variety of procedures, and pharmacy
services.
NAICS 622110, 2007 WL 6902817 (NAICS).
The contracting officer noted that code 622110 contemplates, inter alia,
“establishments known and licensed as general medical and surgical hospitals
. . . . establishments [that] maintain inpatient beds . . . provide food service .
4
. . provide X-ray services, [and] clinical laboratory services.” AR 548. He
noted that this code, although not selected for physicians, was appropriate for
“Ancillary crafts,” for which the Army was also seeking bids at that time.6
In order to give himself some assurance that there were a sufficient
number of small businesses capable of and interested in bidding on the various
medical services being sought, the contracting officer conducted a widelyadvertised “Industry Day.” Potential bidders were invited and briefed on what
the Army was planning. Attendees were notified of the codes being
contemplated and the respective revenue limitations: Physician services621111 ($10,000,000); Nursing services-621399 ($7,000,000); and Ancillary
services-622110 ($34,500,000).
The physician services code, 621111, is the same code currently being
used under existing contracts for services which the parties agree amounts to
the same work presently being solicited. Plaintiff is one of the incumbent
contractors for that work, and, at the time the contract was previously awarded,
it was small enough not to be barred by the revenue limitation. Plaintiff’s
difficulty now, however, is that it has grown, and no longer fits under the
$10,000,000 threshold. Hence, it advocates for the use of the hospital code,
which has a much higher revenue threshold.
II.
Plaintiff’s protest at the Small Business Administration
Bid proposals were due by November 10, 2011. On September 26,
2011, however, plaintiff filed an appeal before the Small Business
Administration (“SBA”) Office of Hearings and Appeals (“OHA”), contesting
the contracting officer’s choice of NAICS code 621111. In its appeal,
InGenesis argued that the proper NAICS code designation should have been
code 622110, not 621111.
InGenesis advanced two theories for why NAICS code 621111 did not
properly encapsulate the solicited services. First, although the solicitation’s
list of specialties included “Physician-Psychiatry,” NAICS code 621111
excludes mental health professionals, including psychiatrists, who have their
6
We have scant information regarding the services being solicited
under “Ancillary crafts.” The record intimates, though, that these are nonphysician and non-nurse services. See AR 548.
5
own NAICS code, 621112. Second, plaintiff argued that NAICS code 621111
falls under the more general NAICS category of “ambulatory health care,”
which characterizes providers as not usually providing inpatient services.
Because many of the specialists listed in the solicitation are associated more
with inpatient services, such as neurosurgeons, general surgeons, plastic
surgeons, and anesthesiologists, InGenesis contended that NAICS code
621111 was inappropriate. Plaintiff further noted that based on its own
experience under the predecessor contract, “nineteen percent of the physicians
it has provided performed solely inpatient services, and another [sixty] percent
provided both inpatient and outpatient services at Military Treatment
Facilities.” AR 573. Plaintiff thus argued that “NAICS 622110 is a precise
match to the RFP requirements.” AR 573.
The contracting officer responded to plaintiff’s challenge at the SBA
OHA by noting that the “government did extensive research and wrote a
determination and findings [report] . . . to support the use of NAICS 621111
for this solicitation.” AR 545. In his view, plaintiff’s proposed code, NAICS
code 622110, is not appropriate for the solicitation because that code describes
industries “known and licensed as General medical and Surgical Hospitals.”
The government is not contracting for entire hospitals, as he noted, but merely
for physicians to augment the staff at already-existing government facilities.
The contracting officer also dismissed plaintiff’s concern that mental health
professionals were omitted by pointing out that those professionals represent
“only a small portion of overall requirements under the solicitation.” AR 546.
The contracting officer offered statistics for two medical treatment facilities.
The first facility, a small one, estimated [ ] total physician hours over the
five-year ordering period, and of those, only [ ] hours (roughly [ ]%) were
for psychiatrists. The second facility, one of the largest, estimated [
]
physician hours, of which [
] hours (roughly [ ]%) were attributable to
psychiatrists. Thus, because the government estimated that doctors who
primarily engage in general practice or surgery encompassed [
]% of the
contemplated services, the contracting officer concluded that NAICS code
621111 was the closest fit. AR 546.
The SBA OHA administrative law judge (“ALJ”) rejected plaintiff’s
arguments and affirmed the contracting officer’s decision to use NAICS code
621111. AR 534-39. The ALJ noted that “[t]he [contracting officer] is not
required to designate a perfect NAICS code.” AR 537 (citing 13 C.F.R. §
121.402(b)). It is possible that “no one designation can be a perfect fit.” AR
537 (quoting NAICS Appeal of AllSource Global Mgmt., LLC, SBA No.
6
NAICS-5292, at 7 (2011)). Thus, the proper NAICS code is the one that “best
describes the principal purpose of the procurement.” Id. (internal quotations
omitted). The principal purpose here was an array of physician-types, not fullservice hospitals.
With respect to plaintiff’s first argument–that code 621111 precludes
mental health services–the ALJ noted that “a fair reading of the solicitation .
. . supports the [contracting officer’s] assertion that psychiatric services are not
the majority of the services to be acquired.” AR 537. Because the solicitation
listed myriad specialties in a non-exhaustive list, the ALJ held that “it would
be difficult to conclude that psychiatric or mental health specialties represent
the principal purpose of the RFP.” AR 538. Thus, even though the RFP does
call for some provision of psychiatric services, “the NAICS code assigned by
the [contracting officer] . . . . properly captures the principal purpose of the
RFP,” which was to supply medical doctors and doctors of osteopathy. AR
538. Implicit in the ALJ’s October 24, 2011 decision, therefore, is that even
though psychiatrists are not described in code 621111, the successful bidder
would nonetheless be allowed to and able to furnish psychiatric services.
Certainly plaintiff’s experience under its existing contract confirms this as it
has been supplying psychiatric services even though the current contract was
classified under code 621111.
The ALJ similarly rejected plaintiff’s second argument–that NAICS
code 621111 was listed under the broad umbrella of the “ambulatory care”
subsector, whereas the performance work statement obviously contemplates
providers performing a great deal of inpatient care. As the ALJ noted,
plaintiff’s proposed code “encompasses entire hospitals and the wide variety
of services offered in hospitals,” whereas “the [performance work statement]
quite clearly reflects[] that the Army is procuring the services of individual
doctors with particular specialties to augment the staff of military treatment
facilities.” AR 538. Although it is true that practitioners classified in the
ambulatory health care subsector “do not usually provide inpatient services,”
they nevertheless “may operate at their own offices or ‘in the facilities of
others, such as hospitals.’” Id. (citing NAICS code 621111). Under SBA OHA
precedent, “[it] is not location of where the services will be performed that is
determinative of a procurement’s NAICS code designation, but the character
of the services themselves.” NAICS Appeal of Med-Nat’l, Inc., SBA No.
NAICS-4762, at 5 (2006).
7
On November 9, 2011, plaintiff filed its complaint here seeking
injunctive and declaratory relief. Plaintiff seeks to supplement the
administrative record with a declaration of its corporate president, Veronica
Edwards. Ms. Edwards offers information concerning: (1) prior Army
physician solicitations, (2) the proportion of psychiatrists that plaintiff has
supplied on previous similar contracts, (3) other federal agency solicitations
made under NAICS code 622110, and (4) comparisons of the amounts of
inpatient versus outpatient services rendered during previous task orders.
Attached to her declaration are data corresponding to the other solicitations to
which she refers.
DISCUSSION
We have jurisdiction under the Tucker Act to “render judgment on an
action by an interested party objecting to a solicitation by a Federal agency for
bids or proposals for a proposed contract or to a proposed award . . . or any
alleged violation of statute or regulation in connection with a procurement or
a proposed procurement.” 28 U.S.C. § 1491(b)(1) (2006). A contracting
officer’s NAICS code designation is made “in connection with” a proposed
procurement. Additionally, the SBA OHA’s decision is similarly “in
connection with” a proposed procurement. See Ceres Envtl. Servs., Inc. v.
United States, 52 Fed. Cl. 23, 33 (2002).
Plaintiff advances three arguments in its motion for judgment on the
administrative record: (1) selection of NAICS code 621111 rendered the
solicitation unduly restrictive of competition, (2) the Army’s selection of code
621111 instead of code 622110 was arbitrary, capricious, and lacked a rational
basis, and (3) the SBA OHA’s decision to affirm the contracting officer was
likewise arbitrary, capricious, or otherwise contrary to law. In response,
defendant argues that the contracting officer’s code designation was rational
because NAICS code 621111 best describes the services being solicited. For
the same reasons, defendant argues that SBA OHA’s decision to affirm the
contracting officer’s NAICS code designation was reasonable.
Plaintiff’s motion for judgment on the administrative record relies
heavily on Ms. Edwards’s declaration and its supporting documentation.
Before we can examine the merits of plaintiff’s substantive arguments,
therefore, we must first decide whether we may consider the information
contained within her declaration and its attached exhibits.
8
I.
Ms. Edwards’s declaration is not needed to allow effective judicial
review
Because of the level of deference accorded to agency action, we
typically review the administrative record already in existence, “not some new
record made initially by the reviewing court.” Camp v. Pitts, 411 U.S. 138,
142 (1973). As the Federal Circuit has noted, we must consider the propriety
of “‘the agency decision based on the record the agency presents to the
reviewing court.’” Axiom Res. Mgmt., Inc. v. United States, 564 F.3d 1374,
1380 (Fed. Cir. 2009) (quoting Fla. Power & Light Co. v. Lorion, 470 U.S.
729, 743-44 (1985)). While this rule is not absolute, the administrative record
should be supplemented only in limited cases in which “the omission of extrarecord evidence precludes effective judicial review.” Id.
Ms. Edwards is experienced in providing medical staffing, and she
makes the following points. The instant solicitation is a “follow-on” contract
to a prior solicitation for physician services, W81K04-08-R-0022. Decl. ¶ 4.
The prior solicitation was classified with NAICS Code 621111 giving it a
small business revenue limit, as amended, of $10 million. Decl. ¶ 5. Ingenesis
Arora Staffing, LLC, a joint venture in which plaintiff is a partner, no longer
qualifies under the 621111 small business set aside limit, but it does qualify
under the set aside allowed by 622110. Decl. ¶¶ 7-8, 13-14. With regard to
the prior solicitation, Ms. Edwards asserts that the “task orders issued by
defendant have been primarily for the services of Psychiatrists.” Decl. ¶ 15.
Specifically, she notes that “[o]ut of a total full time employees (FTE) of
thirty-five, twenty [approximately 57%] have been Psychiatrists.” Decl. ¶ 15.
In terms of dollar value provided, she notes that mental health services account
for sixty-four percent of the total. Decl. ¶ 15.
She also states that, “It has been my experience that federal agencies
commonly use NAICS Code 622110 when soliciting for medical staffing.”
Decl. ¶ 17. According to Ms. Edwards, based on reviewing the FedBizOpps
website, since the prior solicitation was issued, federal agencies have issued
at least forty-seven solicitations under NAICS code 622110 for medical staff
to augment existing medical centers. Decl. ¶ 18. She asserts that, based on
her review of federal agency staffing, most positions to be furnished are ones
that provide inpatient or mental health services. Decl. ¶ 20. Based on
plaintiff’s current contracts with defendant, she asserts that “eighty-four
percent of the physicians we have furnished are providing inpatient and/or
mental health services.” Decl. ¶ 23. Finally, she notes that, concurrent with
9
the instant solicitation, defendant also issued the solicitation for ancillary
services using NAICS code 622110. Plaintiff argues that the above
information is needed to demonstrate the extent to which psychiatric care will
be required and that the services being procured are primarily inpatient in
nature.
The declaration is accompanied by ten exhibits composing sixty-two
pages of material, most of which are not in the administrative record. This
extra-administrative record material includes:
(1) excerpts from a prior solicitation issued in 2008 for physician
services, W81K04-08-R-002 (Exhibit 1);
(2) contracts that were awarded under solicitation W81K04-08-R-002
and older solicitations (Exhibit 2);
(3) information on contractors awarded task orders under solicitation
W81K04-08-R-002 (Exhibit 3);
(4) a summary of physician services broken down by outpatient versus
inpatient services and mental health (Exhibit 4);
(5) a list of prior solicitations using NAICS code 622110 (Exhibit 5);
(6) another solicitation issued in 2011, W81K04-11-R0023 (Exhibit 6);
(7) additional summary spreadsheets regarding physician services under
a prior solicitation awarded to plaintiff (Exhibit 7);
(8) additional spreadsheet information pertaining to physician staffing
plaintiff currently supplies to defendant (Exhibit 8)
(9) an amendment to the instant solicitation (which already appears in
the AR) (Exhibit 9); and
(10) additional summaries of physician services supplied by plaintiff,
again broken down into outpatient and outpatient services, including
dollar values attributable to the services provided (Exhibit 10).
10
The gist of plaintiff’s submission is that Ms. Edwards would have
picked a different code, based on her own experience in contracting with the
government for medical services. There are a number of difficulties with
entertaining this collateral attack on the solicitation. The most basic is that it
presumes we conduct a de novo review of the contracting officer’s work. No
doubt every bidder would like to kibitz the contracting officer’s handling of
the procurement, offering additional information to consider, challenging the
government’s assessment of how much work of certain types could be
anticipated, or suggesting what the government really needs. But the question
is not whether more information might have been available, or what someone
else might have done, but whether the “additional evidence [is] necessary,”
Axiom, F.3d at 1380, for the court to conduct its very limited review. The
court in Axiom cautioned in particular against unnecessarily expanding review
beyond the administrative record in existence and thereby “using new evidence
to convert the arbitrary and capricious standard into effectively de novo
review.” Id. (internal quotations omitted).
A bid protest is not an opportunity to second-guess the agency’s
determinations of what it needs. And we specifically have been reluctant to
consult prior solicitations in determining whether the decisions in a disputed
solicitation were arbitrary or capricious. See NEQ, LLC v. United States, 86
Fed. Cl. 592, 594 (2009). Moreover, neither the extent of inpatient versus
outpatient treatment nor the extent of psychiatric services is ultimately
dispositive. We are prepared to assume that the Army wants psychiatrists and
anticipates the furnishing of significant inpatient treatment. That much
appears of record and is sufficient to frame plaintiff’s claims. Anything
further would convert this into a de novo review.
II.
The selection of NAICS Code 621111 was not arbitrary, capricious, or
otherwise not in accord with the law
Plaintiff argues that the contracting officer erred in selecting NAICS
code 621111 and that SBA OHA erred in affirming that code selection. The
arguments are similar on both fronts and have the following common
denominator: NAICS code 621111 does not capture the principal purpose of
the solicitation because the Army is seeking psychiatric services and inpatient
care providers. We disagree.
11
A.
Soliciting psychiatric services does not preclude using code
621111
The parties agree that the contracting officer must select only one
NAICS code for this contract. The fact that there does not exist one code that
perfectly captures all elements of the work statement is unfortunate but simply
a fact of life in small business contracting. It is understood that the role of the
contracting officer is simply to “select the NAICS code which best describes
the principal purpose of the product or service being acquired.” Ceres, 52 Fed.
Cl. at 25 (citing 13 C.F.R. § 121.402(b)); see also 48 C.F.R. § 19.303(a)
(2011). Primary consideration is given to:
the industry descriptions in the NAICS United States Manual,
the product or service description in the solicitation and any
attachments to it, the relative value and importance of the
components of the procurement making up the end item being
procured, and the function of the goods or services being
purchased.
13 C.F.R. § 121.402(b).
The beginning point in code selection, therefore, is the principal
purpose of the work being contracted. Defendant argues and plaintiff has to
concede that the Army is looking for physicians in a wide range of specialties
(including psychiatry) to work in government facilities. It may also be useful
to highlight what the Army is not looking for: physical facilities, hospitals,
phlebotomists, cafeterias, janitorial services, emergency rooms, etc. In this
solicitation, it is looking for doctors, and nothing else.
It is understandable, therefore, that the following code appeared to be
a good fit:
This U.S. industry comprises establishments of health
practitioners having the degree of M.D. (Doctor of medicine) or
D.O. (Doctor of osteopathy) primarily engaged in the
independent practice of general or specialized medicine (except
psychiatry or psychoanalysis) or surgery. These practitioners
operate private or group practices in their own offices (e.g.,
centers, clinics) or in the facilities of others, such as hospitals or
HMO medical centers.
12
This is, of course, NAICS code 621111, the code under which plaintiff
currently provides these services and the code selected by the contracting
officer and affirmed by SBA OHA.7
Plaintiff’s first argument against this code is that it specifically does not
include psychiatric services, which are classified separately under code
621112, “Offices of Physicians, Mental Health Specialists.” The contracting
officer noted that under the instant solicitation, approximately [ ]% to [ ]% of
the total physician labor required would constitute psychiatric services. AR
514. Plaintiff suggests that volume could be higher, but it has to concede that
Code 621112 cannot be appropriate because, by including only psychiatric
services, it excludes all non-psychiatric services. The contracting officer
could pick only one code, so he understandably picked the most generalized
physician-specific code, 621111. Plaintiff has not argued that the NAICS code
selected would preclude the Army from seeking psychiatric services. If it did,
then plaintiff could not supply psychiatrists under the current contract–a
position that plaintiff clearly does not take.
7
Code 621111 establishes three criteria. Providers must: (1) possess
a medical degree (M.D. or D.O.), (2) engage in the independent practice of
general or specialized medicine (except psychiatry), and (3) operate in either
private practice or in the facilities of others, such as hospitals or medical
centers. The solicitation parallels these requirements, calling for medical
professionals who (1) have a medical degree, (2) practice in various
specialties, and (3) could augment staff at already existing Army medical
centers. Moreover, the 2007 NAICS Index File, provided online by the U.S.
Census Bureau, lists specialties which can be classified under code 621111.
These specialties include, inter alia: gastroenterologists, gynecologists,
immunologists, internists, neurologists, neuropathologists, obstretricians,
oncologists, ophthalmologists, orthopedic surgeons, otolaryngologists, plastic
surgeons, radiologists, other surgeons (except dental), and urologists. 2007
N A I C S
I n d e x
F i l e ,
a v a i l a b l e
a t
http://www.census.gov/eos/www/naics/2007NAICS/
2007_NAICS_Index_File.xls. In other words, a wide range of specialties,
including those which can be readily associated with inpatient hospital care,
can be classified under code 621111.
13
The purpose of the NAICS code determination is not to find a perfect
fit, only a fit that describes the principal purpose of the services being
acquired. The principal purpose of this solicitation was to procure physicians
across various specialties and to have them work in existing government
facilities; code 621111 fully aligns with that purpose.
B.
Any inpatient versus outpatient distinction is not sufficient to
render the selection of code 621111 arbitrary or capricious
The second argument plaintiff offers with the use of code 621111 is that
in the NAICS taxonomy scheme, code 621111 falls underneath the umbrella
of subsector 621, “Ambulatory Health Care Services,” which states that
providers in this subsector, “do not usually provide inpatient services.”
NAICS 621, 2007 WL 6902771 (NAICS). We could question the logic of
characterizing physicians such as neurosurgeons, practitioners of emergency
medicine, radiologists, anesthesiologists, gastroenterologists, general surgeons,
and plastic surgeons as not “usually provid[ing] inpatient services,” but that
anomaly is inherent in the NAICS code structure itself and not created by the
contracting officer. Indeed, in its briefing and in reliance on Ms. Edwards’s
declaration, plaintiff states that “[a]s part of the incumbent contract, 79% of
the physicians provided to the Army by plaintiff perform inpatient services,”
and that “less than one-third of the value of the [incumbent contract] consists
of services that fit within the ambulatory sector 621.” Pl.’s Mot. J. 23.
We decline to permit this generalized and not directly controlling
introductory language to trump the more particularized and directly controlling
language of NAICS code 621111 itself. The chosen code contains no
limitations on whether the physicians do primarily inpatient or outpatient work.
This no doubt suited the Army well, given the fact that all of the work would
be done in its own hospitals and clinics. The distinction would therefore be
immaterial.
In any event, while subsector 621 provides that ambulatory health care
providers do not usually provide inpatient services, this does not mean that
such providers are precluded from providing inpatient services. We agree with
SBA OHA’s observation that in some solicitations, potentially “‘no one
designation can be a perfect fit.’” AR 537 (quoting NAICS Appeal of
AllSource Global Mgmt. LLC, SBA No. NAICS-5292, at 7 (2011)).
14
C.
The failure to use NAICS code 621110 was not arbitrary or
capricious
Plaintiff contends that the contracting officer overlooked a more logical
NAICS code, 621110, which was used in the companion “Ancillary Services”
solicitation. This code has two virtues, at least from plaintiff’s perspective.
The most salient is that it has a much higher small business threshold,
$34,500,000, under which plaintiff fits. The second is that, as the government
concedes, 621110 is written so broadly that it could theoretically cover all the
physician services the government wants, including psychiatrists. We repeat
the description:
This industry comprises establishments known and licensed as
general medical and surgical hospitals primarily engaged in
providing diagnostic and medical treatment (both surgical and
nonsurgical) to inpatients with any of a wide variety of medical
conditions. These establishments maintain inpatient beds and
provide patients with food services that meet their nutritional
requirements. These hospitals have an organized staff of
physicians and other medical staff to provide patient care
services. These establishments usually provide other services,
such as outpatient services, anatomical pathology services,
diagnostic X-ray services, clinical laboratory services, operating
room services for a variety of procedures, and pharmacy
services.
NAICS 622110, 2007 WL 6902817 (NAICS). The code thus includes
physicians generally, along with a wide array of associated facilities and
services, including the furnishing of hospitals themselves.
The agency rejected this code as insufficiently focused on the primary
purpose of this particular solicitation, however, which was physicians. The
question that the contracting officer faced was this: should I pick a code that
is much more narrowly tailored to what the Army wants, namely a broad array
of physicians, despite the fact that it excludes psychiatrists, or should I use a
much broader code that includes physicians, but includes virtually everything
else associated with general purpose hospitals?
The contracting officer chose the former, and thus the question before
us is not what the court would have chosen, but whether the contracting
15
officer’s choice was arbitrary or capricious. We think it plainly was not.
Casting a net wide enough to include bidders capable of furnishing fully
operational hospitals with all allied services seems far in excess of the only
thing the agency wanted: portable doctors. This is particularly true in view of
our prior conclusions that the nominal exclusion of psychiatrists and the
general characterizations of the ambulatory care subsector were not
problematic.
D.
The contracting officer’s NAICS code designation did not
otherwise violate applicable statutes or regulations
Plaintiff also advances generalized arguments based on the requirement
for full and open competition requirements under the Competition in
Contracting Act (“CICA”), 10 U.S.C. § 2305 (2006). Under CICA, the
government must procure goods and services in such a way as to “achieve full
and open competition.” Id. § 2305(a)(1)(A)(I). Specifically, plaintiff argues
that, due to the size limitations, competition is unduly restricted because
plaintiff cannot submit a proposal. These arguments are unconvincing. CICA
expressly allows the government to favor small businesses to further the
policies of the Small Business Act, 15 U.S.C. §§ 638, 644. 10 U.S.C. §
2304(b)(2). Moreover, Federal Acquisition Regulation 6.203 specifically
allows “contracting officers [to] set aside solicitations to allow only such
[small] business concerns to compete.” 48 C.F.R. § 6.203(a). Indeed, “[n]o
separate justification or determination and findings is required under this part
to set aside a contract action for small business concerns.” Id. § 6.203(b). It
is not up to the court to decide how small is too small.8
8
We note additionally that the contracting officer did address the
concern of whether small businesses under NAICS code 621111, i.e., entities
under $10 million in revenue, would be able to provide the contemplated
services. The contracting officer composed a market research report based, in
part, on an “industry day,” that invited small businesses to address any staffing
concerns for proposed medical solicitations, including this one. AR 3-81. In
that report, the contracting officer concluded, “Market research indicates that
there are numerous large and small businesses that are capable of performance
of this acquisition effort and satisfy the agency’s requirements that exist for
staffing Health Care Providers in Military Treatment Facilities.” AR 16.
16
In sum, the selected code captures the principal purpose of the contract.
It need not be a perfect fit to every facet of the performance work statement.
The solicitation sought the services of physicians in a wide-range of specialties
who can practice in military treatment facilities. That is the exact essence of
code 621111. Thus, the contracting officer’s selection of code 621111 and the
SBA OHA’s affirmation of that code were not arbitrary, capricious, or
otherwise not in accord with the law.
CONCLUSION
For the reasons explained above, we deny plaintiff’s motion to
supplement the administrative record with Ms. Edwards’s declaration and
deny its motion for judgment on the administrative record. We grant
defendant’s cross-motion for judgment on the administrative record. The clerk
shall enter final judgment accordingly. No costs.
s/ Eric G. Bruggink
ERIC G. BRUGGINK
Judge
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